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Growth of the affordable housing segment in India in 2021

The lasting effects of the outbreak of Covid-19 have ensured that 2020 has been a difficult year for economies across the globe. While the effects seem to have been muted to a certain extent in the last quarter of the calendar year, in general, several nations and organizations are still coming to terms with a different future than the one initially envisaged.

Work from home has become a reality for many and therefore the value of owning ones home has become that much more important for several families. Furthermore, aside from just work, people have moved several parts of their life to digital platforms such as online education, video-based medical consultations, increased e-commerce and business-related video conferencing and webinars etc. thereby further accentuating the need for a spacious home. This has contributed to the increased demand for residential real estate in major cities across India.

Certain trends in housing and more particularly affordable housing will remain crucial in maintaining the momentum of home sales in 2021. I have highlighted a few below.

Housing for All Mission: The government’s ‘Housing for all’ initiative that it aims to achieve by 2022 has boosted this segment. Various rules and regulations such as the Pradhan Mantri Awas Yojna (PMAY) and the GST rate cut from 8% to 1% for the affordable housing segment-have been made to help the economically weaker section get affordable housing. These new schemes and rules imply that houses below Rs 45 lakh will be exchanged with a GST rate of 1%. Furthermore, the government’s effort to extend the deadline for Credit Linked Interest Subsidy Scheme to March 31, 2021, under PMAY has brought a positive impact on the middle-class and has encouraged them to buy properties with their limited budgets.

Affordable Rental Housing Complexes (ARHCs): The ARHC has been envisaged as a sub-scheme under Pradhan Mantri AWAS Yojana-Urban (PMAY-U) with a view to provide ease of living to urban migrants engaged in informal sectors of the economy. During the lockdown, migrant workers suffered the most as a result of poor communication and lack of welfare schemes. Affordable Rental Housing Complexes scheme will help unlock existing vacant housing stock and make them available for affordable rental. It will also encourage investment and promote entrepreneurship in the rental housing sector by providing the right incentives for private companies and public entities to utilize their vacant land for developing ARHCs.

SWAMIH Investment Fund: A Special Window for Affordable and Mid-Income Housing Investment Fund has been formed to complete construction of stalled, RERA-registered affordable and mid-income category housing projects which are stuck due to paucity of money. The fund is expected to provide relief to homebuyers and fast track stalled projects by providing last-mile funding on a LIFO basis.

Lucrative Investment Prospects: This is the right time for investment in the realty sector as developers are offering cheaper rates for the best properties to clear unsold inventories. Further, interest rates on home loans are extremely attractive at the moment, making this a good time for residents as well as NRIs to take the home investment plunge.

Model Tenancy Law: The much-awaited model tenancy law is expected to come out in 2021. The model tenancy law will eliminate anomalies and give a boost to the real estate sector. Provisions announced in the Act would make renting a viable option for tenants as well as property owners.

Though the real estate market has suffered during this pandemic, there are green shoots of recovery, which are visible since the start of the festive season. It is important that Covid-19 cases in India continue to show a decline, which in turn would help more activities to restart and ultimately push the economy towards recovery. Recent news of successful vaccine trials will only continue to improve this positive market sentiment. There are high hopes from the upcoming budget which is expected to focus on reviving the stalled economic sector.



Views expressed above are the author’s own.


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